Member Info for Yolo_trader

Its all about the barakah

Standard life, third biggest shareholder, dumped almost all its holding in boohoo, expect an RNS soon

People offloading for the weekend to hedge against any negative press

haha quite funny you are comparing wirecard to this, one with obvious fraud and a pyramid scheme and the other with some reputational damage

Ahead of the independent enquiry results, we have retained our Boohoo FY21 earnings forecast (EPS 7.67p, +30% yoy). This assumes +26% FY21E revenue growth, broadly in line with the group’s recent +25% guidance and representing a sharp slow down from the +45% sales increase achieved in 1Q21. In addition, the company expects the initial commitment to invest an incremental £10 million to eradicate supply chain malpractice to be spread over 2 years, and split between capex and opex.

Valuation: In the context of increased uncertainty surrounding the Boohoo earnings outlook, and ahead of the enquiry findings, we have reduced our DCF based price target to 345p (from 500p). Our approach here is to use the current elevated beta (1.35x from 1.1x) as the market is likely to price this uncertainty, driving a 10.8% Boohoo WACC (from 9%). This valuation equates to c.2x FY22E EV/sales (currently trading at 1.3x). We remain Buy rated.

While the suppliers implicated in the Sunday Times report have been terminated by Boohoo for breaching its code of conduct on record-keeping and sub-contracting production, there is thus far no evidence to support claims that workers were paid GBP3.50 per hour by these suppliers versus the UK National Living Wage of GBP8.20-8.72 for workers aged 21 or over. We note the following:

? The UK short-lead-time supply chain is a sustainable competitive advantage, further supported by the group’s diversification into international markets, which now account for 60% of CoGS (versus c30% in last three years), including 40% in Asia and 20% in Europe. We expect reliance on UK supply as a percentage of CoGS to continue to diminish over the medium to long term.

? We believe any impact on demand will be limited. Boohoo targets younger and less affluent customers who are influenced by social media. It has proactively reached out to many ‘influencers’ to reassure them in light of the situation. We believe that negative influencer commentary has been limited to date and that Boohoo’s customers are generally driven more by price, choice, and newness.

500p target price and Buy rating (unchanged): Post a strong Q1 update?.?.?. we leave our FY20-22e earnings unchanged as we expect limited impact from a cost or demand perspective. Our unchanged APV-derived target price of 500p implies c122% upside from current levels and a CY21e EV/sales ratio of 3.10x (versus a 1.53x current and a five-year historical one-year forward EV/sales multiple of 2.60x). In our view, the competitive advantage of the group’s business model and its strong cash generation and balance sheet justify a premium to peers.

Uncrossing trade, does not mean anything

yeah definitely, I can guarantee it will be £10 or below

Pulled it out of thin air

On current Bloomberg estimates [at the opening price] Boohoo trades on a forward one year (year to February 2021) PE multiple of 34x, EV/EBITDA multiple of 21x and EV/Sales of 2.0x, . In our view this is still a premium rating and implies no economic impact from the current supplier issues in Leicester.

We wonder what the negative impact will be from the supplier issues. We do not know the quantum but we do know that sales will be impacted by not being on the ASOS, Next and Zalando websites in the short term and we find it hard to believe that sales for the group’s brands won’t be impacted given the current media storm. We have noticed a surge in social media hashtags including ‘BoycottBoohoo’ and we highlight that millennial consumers are interested in both sustainability and business ethics.

We also question the impact on the cost base and question whether Boohoo has been experiencing input prices for goods that might be no longer sustainable. This may put pressure on gross margins and prices could rise, which would negatively impact their competitiveness. We also wonder what the new compliance measures that the company has announced this week will mean for the cost base. In our view, it will be potentially higher operating costs to demonstrate that the company has the appropriate processes in place for its supply base.

The company has to deliver the outcome of its own investigations and it faces the potential of external enquiries too, according to the media including a possible police investigation. Until the outcomes are better understood, the stock feels less than appetising for many investors and may be totally off limits for many ESG funds for now.

This may in time prove to be a short-term blip and so no damage to brand equity, or it could be a Gerald Ratner moment. In our view, with a premium rating and major issues around brand equity, trading and financial fall-out, we think it wise to move to Sell (from Hold). We will re-visit when we feel the fall-out has settled and we have further clarity on the economic and reputation consequences.

Interesting, according to them a bit further to fall in the short term. I personally think until this investigation is over, this is going to be a bit of see saw.

Interesting to see they have upped their 2022 registered users target to 10m from 7m. Very promising imo

It is certainly more significant than -1.23%

all the airlines are up significantly, not long before that change is reflected here

It is ridiculous that this is still worth nearly 300m on hopes and dreams.

This will keep on going down until there is news. When there is news, it will not be difficult to join the party. I sleep much better at night knowing that i am not holding this in my portfolio.

Queues at most of the centres open today. Bicester village looks absolutely packed

Exactly! Current mcap is way over valued for what it is.

Looks like a longer wait until we see any income. Not a good update imo, market was expecting better progress

What is it?